Key facts
- Reddit reported second-quarter revenue of $805 million, up 61% year-over-year.
- Net income for the quarter was $253 million, an increase of 183%.
- The company anticipates third-quarter revenue to be between $860 million and $870 million.
- CEO Steve Huffman cited "choppy" search engine referrals and volatile traffic later in the quarter.
- Reddit's stock dropped more than 10% in after-hours trading.
Reddit reported strong financial results for its second quarter, exceeding Wall Street expectations with revenue of $805 million, a 61% increase year-over-year, and net income of $253 million, up 183%. The company also provided an optimistic revenue forecast for the next quarter, projecting between $860 million and $870 million.
Despite the positive financial outlook, Reddit's stock experienced a significant drop of over 10% in after-hours trading. This decline was attributed to concerns raised by CEO Steve Huffman in a shareholder letter, where he described search engine referrals as "choppy" and traffic as more volatile later in the quarter.
Investors appear worried about the impact of artificial intelligence on search engine dynamics and its potential to affect Reddit's traffic. The company has a contract with Google to provide content for AI training, but the increasing use of AI summaries by search engines may be diverting audience share from Reddit. The platform's future data licensing agreements with companies like Google and OpenAI were questioned by analysts.
Furthermore, a slight decline in U.S. daily active unique users, from 53.5 million to 53.2 million, added to investor concerns about user growth in key markets. Huffman, however, expressed confidence that Reddit's focus on communities and conversations would continue to attract users, emphasizing progress in revealing content for everyone.
Regarding the relationship with Google, Huffman noted that it predates formal data licensing agreements and indicated that Reddit aims to maximize the value of its data, without committing to a binary outcome for future partnerships.